Accounting Question

This question: 65 point(s) possible Kling Company prepared the following budgeted income statement for the first quarter of 2018: (Click the icon to view the budgeted income statement.) More info January March February 6000 Total 18200 Sales Revenue 5000 7200 Option 1 is to increase advertising by $700 per month. Option 2 is to use better-quality materials in the manufacturing process. The better materials will increase the cost of goods sold to 15% but will provide a better product at the same sales price. The marketing manager projects either option will result in sales increases of 25% per month rather than 20% Cost of Goods Sold 500 Gross Profit 4500 Data table S and A Expenses Operating Income Income Tax Expense Net Income Now prepare the budgeted income statement for Option 2. (Round all amounts to th Total Kling Company Budgeted Income Statement For the Quarter Ended March 31, 2018 January February March 18,200 Kling Company Budgeted Income Statement For the Quarter Ended March 31, 2018 January February March Net Sales Revenue (20% increase per month) S 5,000 $ 6,000 $ 7,200 $ Cost of Goods Sold (10% of sales) 500 600 720 Gross Profit 4,500 5,400 6,480 S and A Expenses ($2,500 + 10% of sales) 3,000 3,100 3,220 Operating Income 1,500 2.300 3,260 Income Tax Expense (30% of operating income) 450 690 978 S 1,050 1,610 S 2,282 $ Net Income 1,820 Total 16,380 Sales Revenue 9,320 Cost of Goods Sold 7,060 Gross Profit 2,118 4,942 S and A Expenses Operating Income Income Tax Expense Net Income Print Done Requirement 2. Which option should Kling choose? Explain your reasoning. If one of the two options is chosen, it would be because net income for for the quarter than the $4,942 currently budgeted, Kling may decide Kling Company prepared the following budgeted income statement for the first quarter of 2018: (Click the icon to view the budgeted income statement.) Kling Company is considering two options. (Click the icon to view the options.) Read the requirements C. Requirement 1. Prepare budgeted income statements for both options, assuming both options begin in January and January sales remain $5.000. Round all calculations to the nearest dollar. Begin by preparing the budgeted income statement for Option 1. Kling Company Budgeted Income Statement For the Quarter Ended March 31, 2018 January February March 5000 6000 72001 Total 18200 Sales Revenue 500 Cost of Goods Sold Gross Profit 4500 S and A Expenses Operating Income Income Tax Expense Net Income Now prepare the budgeted income statement for Option 2. (Round all amounts to the nearest whole number.) Kling Company Budgeted Income Statement For the Quarter Ended March 31, 2018 January February March Total Sales Revenue Cost of Goods Sold Gross Profit S and A Expenses Operating Income Income Tax Expense Net Income Requirement 2. Which option should Kling choose? Explain your reasoning. If one of the two options is chosen, it would be because net income for the quarter is expected to be higher under this option. However, because both options are expected to yield net income for the quarter than the $4,942 currently budgeted, Kling may decide